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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






2. Ed < 1






3. 0 < Ei < 1






4. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






5. The most desirable alternative given up as the result of a decision






6. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






7. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






8. Ed = (%dQd)/(%dP). Ignore negative sign






9. The rational decision maker chooses an action if MB = MC






10. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






11. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






12. Ed = 1






13. Ei = (%dQd good X)/(%d Income)






14. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






15. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






16. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






17. Exists if a producer can produce a good at lower opportunity cost than all other producers






18. AFC = TFC/Q






19. Total product divided by labor employed. APL = TPL/L






20. Demand for a resource like labor is derived from the demand for the goods produced by the resource






21. AVC = TVC/Q






22. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






23. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






24. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






25. The additional benefit received from the consumption of the next unit of a good or service






26. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






27. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






28. The ability to set the price above the perfectly competitive level






29. Models where firms are competitive rivals seeking to gain at the expense of their rivals






30. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






31. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






32. A good for which higher income decreases demand






33. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






34. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






35. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






36. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






37. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






38. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






39. The difference between total revenue and total explicit costs






40. The practice of selling essentially the same good to different groups of consumers at different prices






41. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






42. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






43. Entry of new firms shifts the cost curves for all firms downward






44. The imbalance between limited productive resources and unlimited human wants






45. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






46. ATC = TC/Q = AFC + AVC






47. Entry of new firms shifts the cost curves for all firms upward






48. MUx / Px = MUy/Py or MUx/MUy = Px/Py






49. The change in quantity demanded resulting from a change in the price of one good relative to other goods






50. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good